PENSIONS CRISIS HITS HOME,CLAIMS IoD

The vast majority ofpeople in this country do not have enough pension provision to fund the sort oflifestyle they would wish to lead in retirement, according to a paper publishedtoday by the Institute of Directors (IoD).

The IoDs paper, Crisis? What crisis? Pension policy in theUK forms the basis of the business organisations responses to theGovernments consultations on pension provision.

Ruth Lea, Head of thePolicy Unit at the IoD, said:

There is no doubtabout it, there is a pensions crisis in this country in the sense that thevast majority of people do not have enough pension provision to fund the sortof lifestyle they would wish to lead in retirement.

There are three mainreasons for this:

Firstly, people arenot saving enough, partly reflecting the affordability of pensions and thedisincentive effects of the current Governments Minimum Income Guarantee(MIG).

Secondly, the ratesof return on pension saving have suffered, partly reflecting falling equityreturns and the current Governments removal of the tax credit on dividendpayments.

And, thirdly, thelevel of the pension that is achieved for a given level of saving has beenadversely affected by actuarial factors such as increased life expectancy.

We doubt that theGovernment appreciates the scale of the problem. We doubt if they recognisethat there is indeed a pensions crisis.

The IoD said thatthere is no one solution to this crisis but it is vital that under-pensionedpeople realise that they must increase their pension saving if they are to havea decent pension. And it is crucial that the current Government helps them byreversing the disincentive effects of the MIG and offering more incentives toencourage them to save. The removal of the tax credit on dividend paymentsshould also be reversed, when affordable.

Ruth Lea, added:

We broadly welcomedthe measures in both the Department for Work and Pensions Green Paper onpensions and the Inland Revenues consultation document on the taxation ofpensions, though we had some serious reservations about, for example, theproposed contribution limits. But these consultations are barely scratching thesurface of the pension problem. In particular, they do nothing to improveincentives to save in pension schemes for employers and/or employees and theydo little to remove the existing disincentives to save.

Ends 11.4.03 No.163

Notes to Editors

1. The Government's recent consultations are:

Simplicity, Security and Choice: working and saving forretirement, Green Paper,published by the Department for Work and Pensions (DWP), the Inland Revenue andHM Treasury on 17 December 2002 (TSO,Cm5677):

Simplifying the taxation of pensions: increasing choice andflexibility for all, published bythe Inland Revenue and HM Treasury on 17 December as well.

2. Copies of - Crisis? What crisis? Pension policy in theUK - are available from the IoD Press Office.

3 The IoD (Institute of Directors) is a non-partypolitical independent

organisation with around 55,000 members. In additionto its wide range of

business services, the IoD provides an effectivevoice to represent the

interests of its members to government and keyopinion-formers. It also brings

the experience of business leaders to bear on theconduct of public affairs.

Contact Points:

Ruth Lea, Head of thePolicy Unit, tel: 020 7451 3291

Richard Taylor, PressOfficer, tel: 020 7451 3264

mobile and out of hours: 07721 734886

David Marshall,Director of Public Affairs, tel: 020 7451 3263

mobile and outof hours: 0776 4883420

email:

web: www.iod.com